What are technical patterns? Prices in the forex market move sideways 70% of the time of the time, causing prices to form specific, recurring patterns with distinct characteristics that provide traders with insights into market activity. As we learned earlier, technical analysis is the discipline concerned with studying trader psychology, as this is what is reflected on the chart, revealing patterns that indicate the presence of buyers or sellers—or which is stronger at the moment, allowing us to make investment decisions based on this information. Technical patterns are divided into two categories: Reversal patterns. Continuation patterns. Definition of reversal patterns: - A pattern that forms on the chart at the end of an uptrend in a resistance zone, causing the trend to shift from uptrend to downtrend. Reversal patterns also appear in support zones to shift the trend from downtrend to uptrend, However, the trend does not usually change based on these patterns, as what occurs within them is a shift in momentum from buyers to sellers or from sellers to buyers—a phenomenon known as a “change of hands.” Definition of Continuation Patterns: - A pattern that forms on the chart within an uptrend or downtrend, indicating that the trend is still continuing, as the trend’s dominant force—whether buyers or sellers—remains strong and will not change direction. on the contrary, the trend will continue. Therefore, as we will see later, if a bullish continuation pattern appears in a downtrend—or vice versa—this is illogical, and a shift has indeed occurred in the psychology of buyers and sellers. Conditions required for any reversal pattern: It must be preceded by a trend, whether uptrend or downtrend. In reversal patterns that follow a downtrend and cause prices to reverse upward, they must be accompanied by high trading volumes upon confirmation of the pattern, and these trading volumes in the stocks are real and visible. Reversal patterns that follow an uptrend form and reverse the trend regardless of whether trading volumes are large or small, because falling prices can decline simply due to their own weight. The larger the volume of the pattern, the greater its potential targets. Reversal patterns at bottoms usually take longer to form than reversal patterns at tops. Each pattern has a detailed explanation of how to use it, its components, its psychology, and how to trade it; we will explain this in upcoming articles.
